PayPal is the world's largest online payment system. It offers electronic money transfer across the globe and is an electronic alternative to traditional methods such as money orders and paper checks. PayPal processes payments for online auction sites and vendors, for which it charges a transaction fee.
Formation of PayPal
PayPal was formed in 1998 as Confinity by Ken Howery, Luke Nosek, Max Levchin, Peter Thiel, Yu Pan, and Russel Simmons. In its early stage, the company focused on developing software security for individual clients. In early 2000, the company began developing and testing an online money transfer system, which attracted the attention of Elon Musk, the founder of X.com, a company that offered online banking services. In March 2000, Confinity and X.com merged, and a few months later, Musk decided to terminate the banking services of X.com and focus on financial transactions. In 2001, X.com was renamed as PayPal. The company developed rapidly during its development stage due to its referral programs and low charges, and quickly registered five million new clients between March and the summer of 2000. In 2002, PayPal floated shares in the NASDAQ, and within the same year, its share price grew by 55%.
eBay Subsidiary and Acquisitions
In October 2002, eBay acquired PayPal for approximately $1.5 billion at a share price of $23. Over 70% of eBay sellers accept PayPal, and one in four transactions occur through the platform. Within a few years, most competing payment companies had closed. Between 2005 and 2015, PayPal experienced steady growth driven by popularity due to innovation and convenience. During this period, the company acquired VeriSign, Fraud Sciences, Bill Me Later, IronPearl, Braintree, and Zong, while at the same time partnering with MasterCard and Discover Card to offer convenient payments. In 2017, PayPal acquired TIO Networks and Swift Financial, and a year later, it acquired iZettle, Hyperwallet, and Simility. In September 2019, PayPal bought a 70% stake in GoPay.
In September 2014, eBay and PayPal announced that the two companies would split and trade separately, a move that was completed in July 2015. PayPal currently operates as a public company, with shares bought and sold on the NASDAQ. The company's corporate headquarters are located in San Jose, California, while its operations center is in Omaha, Nebraska. Its European headquarters are in Luxembourg, and its international headquarters are located in Singapore. PayPal opened a new global operations center in Kuala Lumpur in 2014. In 2018, the company generated US$15.451 billion in revenues and declared a net profit of US$2.057 billion. As of August 2019, PayPal had 286 million active users.